Earnings Predictions
for the
Week Beginning November 06, 2017

 An Avalanche of Companies Reporting Earnings In The Week Ahead!

by Ian Harvey

November 06, 2017

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Avalanche

Earnings Predictions for the Week Beginning November 06, 2017

 – An Avalanche of Companies Reporting Earnings

In The Week Ahead! -

U.S. equities closed at record highs last week on the back of a sharp rally in Apple shares. Qualcomm also jumped as Broadcom considers acquiring the chipmaker.

Major retailers join S&P 500 companies reporting in the week ahead with earnings expected from Nordstrom, Macy's, Kohl's and JC Penney. Merger news could also dominate, as traders await a $100 billion bid for Qualcomm by Broadcom.

There are just a few economic reports expected, with wholesale trade Thursday and consumer sentiment Friday.

The week also marks the one-year anniversary of President Donald Trump's election, and the S&P 500 has gained 21 percent in that time. Trump will be in Asia during the coming week, visiting Japan, South Korea, China, Vietnam and the Philippines.

Past Earnings

The Dow, S&P and Nasdaq all closed at record highs Friday, with the Dow and S&P ending higher for an eighth straight week -- their longest weekly win streaks since 2013 -- and the IXIC making it six in a row.

The S&P 500 Index (SPX) rose to 2,587.84, up 0.2 percent for the week. The Nasdaq Composite (IXIC) was up 0.9 percent for the week to 6,764.44. The Dow Jones Industrial Average (DJIA) was up 0.4 percent for the week to end at 23,539.19.

The CBOE Volatility Index (VIX) at 9.14 lost 6.7% on the week.

It has been an impressive earnings performance from the Technology sector, which should help ease concerns about the sector’s strong performance lately. For the Tech sector, there are now Q3 results from 85% of the sector’s market cap in the S&P 500 index. Total earnings for these Tech companies are up +22.4% from the same period last year on +9.3% higher revenues, with 81.8% beating EPS estimates and 86.4% beating revenue estimates.

There are now Q3 results from 406 S&P 500 members; that combined account for 85.4% of the index’s total market capitalization. Total earnings for these companies are up +7.5% from the same period last year on +6.3% higher revenues, with 73.9% beating EPS estimates and 66.7% beating revenue estimates.

Earnings Ahead

Nvidia (NVDA) leads another rush of highly rated chip companies reporting results, while top Chinese companies like Sina (SINA) and Weibo (WB) will follow Alibaba's (BABA) strong numbers, and Disney (DIS) will weigh in as fresh concerns of subscriber losses.

Department stores will report ahead of what could be their most challenging holiday season since the Great Recession.

After a bullish quarterly report from consumer tech giant Apple (AAPL), the stocks to watch this week are five iPhone plays: Broadcom (AVGO), Skyworks Solutions (SWKS), Texas Instruments (TXN), Applied Materials (AMAT) and Qorvo (QRVO).

The Q3 earnings season has been quite positive…..

  • There is clear momentum on the revenue front, with growth notably accelerating from other recent periods.
  • There have been an above-average proportion of positive surprises.
  • The revisions trend for the December quarter is looking to be extremely favorable.
  • Total Q3 earnings for the S&P 500 index are on track to reach a new all-time quarterly record.

Economic calendar

Monday

  • 12:10 p.m. New York Fed President William Dudley
  • 2 p.m. Senior loan officer survey

Tuesday

  • 10 a.m. JOLTS
  • 1:15 p.m. Fed Vice Chairman Randal Quarles discusses financial regulation at Clearing House annual conference
  • 3 p.m. Consumer credit
  • 3 p.m. Fed Chair Janet Yellen accepts Paul H. Douglas Award for Ethics in Government
Thursday
  • 8:30 a.m. Initial claims
  • 10 a.m. Wholesale trade

Friday

  • 10:00 a.m. Consumer sentiment
  • 2:00 p.m. Federal budget

Earnings Results for the Week Beginning October 30, 2017

DATE TRADE GAIN
October 30, 2017 MDLZ NOV 17 2017 40.000 PUT P.P: 127%
October 31, 2017 MA DEC 15 2017 150.000 CALL P.P: 56%
November 01, 2017 TSLA DEC 15 2017 300.000 PUT P.P: 86%
November 01, 2017 FB NOV 17 2017 180.000 CALL P.P: 96%
November 02, 2017 AAPL DEC 15 2017 175.000 CALL P.P: 135%
November 02, 2017 ATVI NOV 17 2017 65.000 CALL P.P: 55%
November 03, 2017 CBRE DEC 15 2017 40.000 CALL P.P: 47%

NOTE: P.P: – Potential Profit


Options Trades to Consider Based on Expected Earnings Reports:

Monday, November 06

Skyworks Solutions Inc. (NASDAQ:SWKS) – will report after the market closes. Wall Street expects Skyworks to earn $1.75 per share in the fourth quarter on revenue of $980.3 million, which is in line with the company's guidance. By comparison, the chipmaker earned $1.47 per share on revenue of $835.4 million in the year-ago quarter, indicating that its revenue and earnings will increase in the mid- to high-teens on a year-over-year basis.

The Earnings Whisper number is $1.78 per share. Investor sentiment going into the company's earnings release has 83% expecting an earnings beat.

Skyworks Solutions has outperformed the semiconductor market this year thanks to smartphone bellwethers such as Apple (NASDAQ: AAPL) , Samsung , and Huawei choosing its chips to power their flagship devices – therefore, the semiconductor specialist has had consistent growth, so it is not surprising to see its shares have shot up around 50% so far in 2017.

Option trade to consider: Buy the SWKS NOV 17 2017 115.000 CALL at approximately $2.90.

 Tuesday, November 07

Weibo Corp (ADR) (NASDAQ:WB) -- will report after the market closes. The consensus on Weibo, known as the Twitter (TWTR) of China, is for EPS of 46 cents, up 92%, on revenue of $300 million, up 69%.

Shares have nearly doubled since April, and trade at almost 37x Street EPS estimates for 2018. But there's obviously great growth potential here: analysts are projecting 88% EPS growth and a 60%+ increase in revenue. Meanwhile, WB shares actually have pulled back a bit heading into the report, falling about 12% from all-time highs reached in September. That should keep expectations moderate and provide some room for gains off an earnings beat.

Investor sentiment going into the company's earnings release has 76% expecting an earnings beat. Short interest has decreased by 21.5% since the company's last earnings release. Overall earnings estimates have been revised higher since the company's last earnings release.

Option trade to consider: Buy the WB NOV 17 2017 100.000 CALL at approximately $2.75.

Marriott International Inc. (NASDAQ:MAR) -- is scheduled to report third-quarter 2017 numbers after market close. Analysts see EPS rising 7.7% to 98 cents with revenue jumping 36.3% to $4.98 billion.

Given the company's increased scale and distribution post Starwood purchase, Marriott's top line is likely get a boost in the to-be-reported quarter. This, in turn, is expected to drive the bottom line and aid in keeping up the earnings streak.

Increasing business and leisure travel on the back of improving economic indicators and positive employment numbers, along with strong transient demand is likely to boost performance in the quarter. Marriott's rising North American business and large international exposure are also expected to drive growth.

Option trade to consider: Buy the MAR NOV 17 2017 125.000 CALL at approximately $1.95.

Wednesday, November 08

Square Inc. (NYSE:SQ) -- reports Q3 results late Wednesday, and analysts expect EPS of 5 cents, swinging from a year-ago loss of 9 cents a share, with revenue rising 30% to $574 million. The Earnings Whisper number is $0.07 per share. Consensus estimates are for year-over-year earnings growth of 155.56% with revenue increasing by 30.71%.

Investor sentiment going into the company's earnings release has 83% expecting an earnings beat.

Best known for processing credit card payments for small businesses, Square has created a stickier business by offering payroll and lending services to customers that already rely on it to process payments. Shares have nearly tripled this year and are in profit-taking sell territory after breaking out in September.

Square Register could change things. If Square Register gains traction with larger merchants, the company could not only fortify its lead in an important market but also possibly begin generating meaningful profits from hardware. Beyond Square Register's role in better positioning Square to cater to larger businesses, the hardware's higher price point could prove to be a catalyst for the company's financials.

Option trade to consider: Buy the SQ NOV 17 2017 37.000 CALL at approximately $1.85.

Monster Beverage Corporation (NASDAQ:MNST) -- is expected to report earnings after market close. Based on 7 analysts' forecasts, the consensus EPS forecast for the quarter is a 21% jump in EPS to 40 cents and a 14.3% increase in revenue to $901 million. The reported EPS for the same quarter last year was $0.33.

The energy drink maker has a global distribution partnership with Coca-Cola (KO) so international sales have become a bigger focus. Soft drink sales have declined over the last decade while energy drink demand continues to grow, leading some analysts to speculate that Coke, which has a 16.7% equity stake in Monster, could buy the rest of the company. Monster shares are in buy range ahead of earnings after breaking out of a flat base with a 57.35 entry point on Oct. 31.

 Monster Beverage has become a recession-proof business in recent years. Its partnership with soft-drink giant Coca-Cola (NYSE: KO) has allowed it to take the lead in the energy drink space. Not only is it at the forefront of the energy drink segment, it has also increased its revenue every year.

Option trade to consider: Buy the MNST NOV 17 2017 60.000 CALL at approximately $1.00.

Thursday, November 09

Walt Disney Co (NYSE:DIS) -- reports late Thursday, and analysts project a 2% fiscal Q4 EPS gain to $1.12 on a 0.1% revenue uptick to $13.15 billion.

CEO Bob Iger had already warned on earnings, citing Hurricane Irma, higher costs for NBA rights and the investment in BAMTech. Meanwhile, Disney is also reportedly cutting about 300 jobs at Disney/ABC Television, and ESPN figures remain a near-constant worry.

Investor sentiment going into the company's earnings release has 41% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 1.82% with revenue decreasing by 0.02%. Short interest has increased by 63.1% since the company's last earnings release.

Overall earnings estimates have been revised lower since the company's last earnings release.

Option trade to consider: Buy the DIS NOV 17 2017 97.500 PUT at approximately $1.60.

Friday, November 10

J C Penney Company Inc. (NYSE:JCP) – will report before the market opens. The report will be for the fiscal Quarter ending Oct 2017. Based on 8 analysts' forecasts, the consensus EPS forecast for the quarter is $-0.43. The reported EPS for the same quarter last year was $-0.21.

On October 30, Susquehanna cut its rating for JCPenney (JCP) stock to “neutral” from “positive” and lowered its price target to $3.00 from $6.50. Susquehanna downgraded its rating following news of JCPenney lowering its fiscal 2017 guidance on October 27.

Also, on October 30, Citigroup also downgraded its rating for JCPenney stock to “sell” from “neutral” and lowered its price target to $1.50 from $3.00.

As of October 30, 86% or 18 out of 21 analysts had a “hold” recommendation for JCPenney stock. Two analysts had a “buy” rating, and one analyst had a “sell” rating.

Option trade to consider: Buy the JCP NOV 17 2017 2.500 PUT at approximately $0.25.

In Conclusion

A positive outlook from Nuveen's chief investment strategist, Brian Nick, is meaningful.

"If you're looking forward into the end of next year, the light is still green for the U.S. economy and for corporate profits," he said.

"Between now and then, we see the markets anywhere between 8 percent and 10 percent higher, and that's basically in-line with our expectations for earnings growth," the investor said.

A strong earnings season has been one of the main drivers for the fresh market highs. With more than half of S&P 500 Index companies reporting so far, nearly three-fourths of them have exceeded Wall Street estimates, while 17 percent missed and 9 percent were in-line.

"I think we are going to see stronger earnings not only in the U.S. but abroad, and that's going to be good for global equities across the board," Nick said.

It is worth mentioning that “complacency” in an ever-increasing stock market, should be controlled as there are still plenty of potentially detrimental geopolitical and economic factors; therefore, it is important to refrain from getting too comfortable and complacent; the key-word now is “vigilance” – even though there seems to be little in the way of catalysts to de-rail the rally.

Bear-in-mind, that the markets could react in the short term to any further signs of escalation or de-escalation of the geopolitical risk, as well as the impact of the natural causes, which will help plan for a successful and profitable week ahead.

Therefore, with the market uptrend still continuing, investors should exercise extra caution. But by learning to use call and put options, investors can significantly reduce risk and capitalize on basing stocks that are making breakaway gains caused by earnings reports.

Now that the earnings season is in full-swing, members of Stock Options Made Easy are receiving recommendations from our private option trading portfolios. There are two memberships available, “Cut-to-the-Chase” and “Armchair Trader” Membership Series, which provides you with the very best of recommendations.

As to the “trades to consider” mentioned in this article, you will notice that most options trades have short-term expiry dates, as the expected movement of the option’s price should occur just prior to, or shortly after, report of earnings. It is entirely up to the individual trader as to whether they add a stop-loss or not, and also when to exit – prior to, or after the earnings announcements.

It is Important to Note: That these suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.

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